Things To Do Before Starting A Finance Company In India

India is one of the emergent markets that provide good conditions for entrepreneurship and Investments. Its financial sector is diversified and continues to grow at a fast pace, which does open up a world of opportunities and excitable careers. India’s industry is increasing by close to 8.5 percent per year, an indication of a strong economy.

Now is the right time to start up your own finance company and open up India’s growing market. Finance companies in India allow for greater diversification and innovation when compared to the banking system, so take advantage of this. All that’s needed for company formation in India is a smart marketing strategy and a strong business plan.

Research the Industry

Ensure that you have a good understanding of the country’s financial sector, before getting started. Company formation in India has specific requirements because they operate differently from traditional banks. Company formation in India can be registered in several forms, like:

Non-banking finance companies

Societies and Trusts

Microfinance company

Each form has its pros and cons. The Reserve Bank of India governs finance companies that are non-banking for instance. This is where obtaining a license comes to the fore. When carrying out your company formation in India, you can incorporate a loan company, one engaged in the Securities industry or one that specializes in asset-backed financing, depending on your projected goals.

NBFCs are registered as PLCs under the Companies Act of 1956 of India and need a minimum capital of Rs two crores. To start a microfinance company, your minimum capital must be higher than Rs five crores.

Once a license is obtained, you can provide loans and cash advances, receive deposits, sell insurance policies and acquire shares and stocks. You probably won’t be able to demand and accept deposits as traditional banks do. You will be able to accept foreign payments but up to a certain limit. The basic advantage is that you are allowed to work in any place in India and provide a wide range of financial products.

Other business registration options include but not limited to the following:

Trust and societies

Producer Companies

When being compared to NBFCs, these businesses are more specifically minded. Producer Companies, for instance, makes sense to farmers. Trust and societies are permitted to provide finance only to registered members. NBFCs provides greater flexibility.

Applying for a Company in India

After you’ve chosen a business model, the next step in Company formation in India is applying for a finance company registration. Move over to a local branch of the Indian Reserve Bank or visit its official website. Download the application form and supply the required information. Upload the form to receive a reference number.

Visit a regional office of your bank with your reference number and your registration form. If you’ve met the conditions stated in section 45-IA of the Reserve Bank of India Act of 1934, you’ll be issued a Certificate of Registration within five to six months.

You should know that not all types of financial Companies require NBFC license. These include venture capital Companies, housing finance companies, stock broking Companies, and insurance agencies. Securities and Exchange Board of India regulates Companies that specializes in stock broking, so they require a different kind of license.

Also, note that determining the type of NBFC license that suits your needs will depend on the nature or type of your business. You will then be able to launch an asset finance company, a loan company, a micro-finance Company, etc. Regardless of the company you choose, registering finance companies in India isn’t going to be easy. Be ready to file out intensive paperwork and wait for a decision. While you wait, create a business model.

Assess the Business Requirements

Analyze the cost involved, depending on the size of your business. Look into the salary and wages, marketing activities, utilities, office space. Considering operating online? Then a website would be necessary. Also, Investment in advertising, web design and digital marketing would remain indispensable. Decide how many employees are required. Also, determine if you’re going to run the business solely, or with a partner.

Develop a Business Plan

Having obtained the license and crunched the numbers, device a business plan. Look at it as a blueprint for the future development of your company. Pen down your long and short-term goals, mission statement, strategies, and product offerings. Analyze the market and potential competitors.

Make sure you take the time to grow your network and involve in the local community. The popular your business, the higher your chances are at success. Send out press releases, make connections, attend local events after your company registration in India is done.